Power Point: Higher
Rates for Higher Takes
The Philippine
government is giving itself until 2008 to dispose of public power assets,
saying this would bring down electricity rates and benefit the public in
the end. But the government is turning out to be unsuccessful in its bid
to privatize at least 70 percent of power assets in Luzon and the Visayas,
with the failed bidding for the 600-megawatt Masinloc Coal-Fired Power
Thermal Plant worth $561 million. The failed Masinloc deal is assailed by
critics as the biggest setback in the government’s thrust to privatize its
power generation assets.
BY JHONG DELA CRUZ
Bulatlat
The
Philippine government is giving itself until 2008 to dispose of public
power assets, saying this would bring down electricity rates and benefit
the public in the end.
But the
government is turning out to be unsuccessful in its bid to privatize at
least 70 percent of power assets in Luzon and the Visayas, with the failed
bidding for the 600-megawatt Masinloc Coal-Fired Power Thermal Plant worth
$561 million. Partner-buyers YNN Pacific Consortium and Malaysian firm
Ranhill Berhad, Ltd.have been unable to pay the complete amount of the
winning price bid.
The failed
Masinloc deal is assailed by critics as the biggest setback in the
government’s thrust to privatize its power generation assets.
But the
government’s power privatization unit, the Power Sector Assets and
Liabilities Management (PSALM) Corp., insists on pushing through with the
privatization scheme, stating that the failed bidding has not imperiled
the auction of the government’s transmission facility and some 10 other
generation assets scheduled this year.
Transmission
assets operated by the National Transmission Corporation are being eyed by
at least seven investors for a 25-year concession contract. Five of the
investors have started to secure bid documents as part of what is called
their due diligence to qualify for the bidding set this coming September.
In February,
PSALM set the sale sequence of at least 10 power plants. These plants are
among 25 remaining power facilities that are up for privatization until
2008.
Snail-paced
Renato
Reyes, Jr., secretary-general of the militant Bagong Alyansang Makabayan (Bayan
or New Patriotic Alliance), said that if all of the power plants lined up
for auction would follow the same bidding scheme such as Masinloc, the
government will surely face failure.
“The
government, through PSALM, is evading its responsibility in Masinloc by
just saying we should move ahead, but if the succeeding auctions would
follow that of Masinloc the government will again lose,” he said.
Based on a
study by the think tank IBON Foundation, the Masinloc plant accounts for
99 percent of the 605.8-mW total capacity of all generation assets under
various stages of privatization. IBON data further show that the said
power plant accounts for 99 percent of the total winning bid prices for
the generation assets being privatized.
“The sale of
Masinloc has been mishandled by PSALM and is a clear example of illegal
acts, giving undue advantage to YNN,” Reyes said.
Bayan filed
legal charges against government officials including Department of Energy
secretary Raphael Lotilla and Psalm president Nieves Osorio, to wit
government accommodation of YNN Pacific Consortium, buyer of Masinloc.
Bayan has
also accused the government of muddling the Masinloc fiasco by pressing
the Manila Electric Co. (Meralco), distributor of at least 70 percent of
Luzon’s power needs, to sign a 10-year supply contract. In turn, the
Lopez-owned distribution utility would be granted a rate increase at
P0.1476/kilowatt hours pending before ERC, and be absolved of its other
obligations with government corporations.
Broken
promise
In its 8th
Status Report on the implementation of EPIRA, the Department of Energy has
admitted the most contentious reason why the Philippines has high
electricity rates are the agreements the government had entered into with
Independent Power Producers.
In 2005,
electricity retail sales increased to 39,616 million kWh, with revenue of
P269 billion, a 24-percent increase from 2004.
“The big
jump was due to the continued increases in the generation rates of the NPC
due to tariff recovery adjustments to cover the huge loses incurred from
several years of selling power below cost,” the report read.
In September
2004, the Energy Regulatory Commission (ERC) granted Napocor’s petition to
increase its generation rates by a nationwide average of P0.9798/kWh.
The latest
increase in generation rates was only in June, when the ERC acceded to
Napocor’s 6th Generation Rate Adjustment Mechanism (GRAM) and 5th
Incremental Currency Rate Adjustment (ICERA) applications adjustments
totaling to P0.3797/kWh.
Generation
companies are allowed by the ERC to submit quarterly applications for
recovery adjustments.
“(The) EPIRA
even resulted in higher electricity rates, despite its promises to bring
them down,” said Dr. Giovanni Tapang, chair of Agham (Association of
Science and Technology Advocates for the People).
Early on,
various cause-oriented groups had predicted that the power purchase
adjustment (PPA), together with the “onerous” contracts being signed
between independent power producers (IPPs) and the government as well as
the unbundling scheme ordered by the ERC, the public would be “bled dry”
with rate hikes, said Tapang.
Currently,
the Philippines ranks third among select countries in Asia with high
electricity rates averaging at P8/kWh, next to Japan. In Southeast Asia,
the country ranks next to Cambodia, even leading the more prosperous
Singapore.
No roll-back
With ways to
get around and push up prices of electricity, the public cannot expect any
rollback anytime soon, Tapang said.
He said that
with privatization alone, transnational corporations could now enter and
control the public power assets together with a handful of local power
tycoons.
“As in the
case of Masinloc, if a supply contract was negotiated between YNN and
Meralco, we can expect that both companies will lobby for higher rates to
regain what they’ve invested,” he said.
In total,
Meralco owes the government over P26 billion in separate accounts with the
Napocor and Transco.
Meralco has
obligations with Napocor totaling P20.6 billion over an unpaid 10-year
electricity supply. While the firm also owes Transco P6.373 billion, most
of this amount is made up of overdue ancillary services related to
Meralco’s pending settlement agreement with Napocor.
Following
the EPIRA, the national government has absorbed P200 billion of Napocor’s
debts. The government utility firm has outstanding debt of $7 billion or
P372 billion.
In June, the
government launched the Wholesale Electricity Spot Market to serve as a
“stock market.” This, according to the Philippine Electricity Market
Corporation, would give consumers leeway to access power utilities that
offer lower rates.
However,
such a viable pool of market had yet to be seen. “If the likes of Aboitiz
and the Lopezes are the ones who will participate in the spot market, then
the purpose of spot market is defeated, for the bigwigs in the power
industry would surely wield more influence and interest,” Tapang said.
Meantime,
the public could only closely watch how the government muddles up the
power sector. For in the next four years, he said, they can only expect
more increases to come. Bulatlat
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